Singapore’s Payroll and Tax Guidelines: What You Need to Know
It’s easy to see why global companies are so attracted to setting up or expanding their businesses in Singapore. Situated in the heart of APAC, Singapore gives businesses the perfect location for a regional office. On top of that, the transparent business environment, strong free-market economy, and low corporate tax of 17% give businesses even more incentive to set up shop here. However, doing business in Singapore means having to better understand the city’s payroll and tax guidelines. Here are a few things to keep in mind.
Employment Guidelines
Under Singapore’s Employment Act, every employee contract has to include the job scope and title, work hours, probation clauses, remuneration package, employee benefits, code of conduct and termination. All of which must be included in order to avoid incurring severe fines or even possible jail time.
If your company is looking to hire foreigners, you are responsible for the application of a valid work permit/visa for your employee before they can start working for you. Another thing to note is the quota on how many foreign workers you can employ in your company.
Compensation Guidelines
Even though Singapore doesn’t have minimum wage, there is a standard 8-hour workday and 40-hour work week (Monday to Friday) set by the Ministry of Manpower. Pay is given monthly and Singapore requires itemized payslips that include details like date of payment, basic salary amount, deductions made (if any), and net monthly salary.
When it comes to severance pay, it is not a requirement in Singapore but there is a common practice to pay between 2 weeks to 1 month’s salary for each year of service. If your employee is a Singapore Resident, and was dismissed on the grounds of misconduct, you have to pay his/her salary on the last day of employment or within 3 days from the date of termination.
If your employee is a foreign worker, your company is required to hold his/her pay and inform the Inland Revenue Authority of Singapore (IRAS) at least 30 days before their last day of employment to facilitate tax clearance for foreign workers.
Tax & CPF Guidelines
Singapore follows a progressive tax rate based on your employees’ income. If your company has more than 15 employees, you are required to submit your employees’ income information online to the IRAS. For companies with less than 15 employees, you can volunteer to join this Auto-Inclusion Scheme to skip distributing physical copies of the tax form IR8A to each employee.
Another essential requirement to take note of is that under Singapore’s Income Tax Act and GST Act, employers need to keep proper records of all employees’ income and deductions submitted to IRAS.
Singapore also has its own comprehensive social security savings program called the Central Provident Fund (CPF). It’s required by law for employers to contribute monthly to an employee’s CPF.
Leave Guidelines
When it comes to paid leave, employees are entitled to a standard 14 days as long as they’ve been working for your company for at least 3 months. On top of that, they are also given 6 days of paid childcare leave, 14 days of paid sick leave, and up to 60 days of paid hospitalization leave (where applicable).
For maternity leave, female employees can take up to 16 weeks with 4 weeks taken before delivery, and 12 weeks after birth. As an employer, you are required to pay for the first 8 weeks of maternity leave. Anything after that can be discussed with the employee. If your employee qualifies for government-paid maternity leave, you can get up to $10,000 for every 4 weeks of leave reimbursed to the company from the government.
The guidelines in Singapore are pretty straightforward, but require an in-depth understanding. If you’re looking to expand or start your business in Singapore, it’s best to get familiar with all the relevant policies and work with a trusted global payroll service to make sure your business is always compliant.